It’s not just about neoliberal ideas

If others share John Richards reading of the main messages of Inequality and the Fading of Redistributive Politics, then we have failed in our mission. Our underlying explanation is not that neoliberal ideas seeped into Canada. We think the common refrain that the “spread of neoliberal ideology” has been the deus ex machina behind the trend is analytically incomplete at best, and theoretical hand-waving at worst. We set out to get at the politics, institutions and organizations underlying all this. Ideas have to have “carriers” and “implementers” to have consequence. Ideas need to be attached to political actors and become embedded in institutions. The world of ideas is contested terrain so we have to account for the failure of the opponents of neoliberalism to resist its principles and practices.

We do give ideas a nod. The bits of neoliberal theory that take root vary a lot according to national context. Canada’s neoliberal moment (Paul Martin’s 1995 budget), as David Green and James Townsend argue in their chapter, was influenced by the ideas of the 1994 OECD Jobs Study, though they are cautious. Was the Jobs Study “causal” or did it just provide post facto intellectual cover for Canadian policymakers? We also take seriously Robin Boadway’s claims about the role of the post-Keynesian revolution in taxation theory, largely because of the broad consensus reached around an antitax agenda since the 1980s, not only on the right but also among political elites in traditionally centre-left European parties.1

The core message of the book, however, focuses first on the role of organizational change (organized political combat) at the level of political parties, the changing balance of power and influence between business and labour, and the decline of civil society organizations that speak for the disadvantaged.

Second, we highlight changes in the institutional environment in which political combat takes place. We focus on the long-term decentralization of taxing and spending powers from the federal to the provincial level. Our views on this point are strongly influenced by comparative research on the role of federalism as a limiting constraint on social spending. We also focus on changes in bureaucratic politics – on the one hand the declining role of “line” departments and their cabinet ministers as advocates for their constituencies, and on the other the concentration of policy design in Finance and of political control in the Prime Minister’s Office.

Our explanandum (the dependent variable) is not the surge in economic inequality per se but rather the politics that enabled it. An inequality surge driven by the top pulling away from the middle while poverty rates were either stable or declining (the bottom has not been moving away from the middle) was a novel development in the postwar years, and none of the our traditional policy frameworks had much to offer in response.

Income distribution issues in the Anglo-Saxon countries have long been locked into an “antipoverty” frame. Compare with Sweden and other corporatist countries that historically combined a productivity-enhancing wage push at the bottom with anti-inflationary wage constraint at the top. Many Canadian government departments monitor low-income rates among their clients but, as David Good points out in his chapter, no government department is charged with worrying about inequality and the Gini coefficient. Hence, we conclude, Canada mainly got “policy drift.” Governments have not responded energetically to the evidence of growing inequality, and they have not modernized the policy architecture in light of new social risks confronting Canadians.

Richards is correct that the politics of education is a serious omission in our review of the evidence. As Jane Jenson points out in chapter 1, there has been a great deal of chatter about new “social investment” in education for the very young and in job training for workers (“active labour market policy”) since the 1990s. Had we included spending on education and active labour market policy, however, the news would have been much worse. OECD data indicate that education spending in Canada declined from 7.7 to 4.6 per cent of GDP between 1980 and 2007 while expenditures on active labour market policy went from 0.6 to 0.3 per cent of GDP.2 The impact of this trend in the generations to come on the lower social gradient in educational outcomes that Richards so rightly celebrates is not hard to imagine.